Mergers, acquisitions and IPOs — Oh, my!

Dell is buying EMC for sixty billion dollars — and Joe Tucci is resigning after 15 years on the job. I worked at EMC from 2006 to 2010, as well as Compellent, which was acquired by Dell. Despite all that, in a million years I could not have predicted this acquisition. Ironically, EMC is the one with a reputation for acquisitions.

The times, they are a changin’

Since about 1996, EMC has used acquisitions to gain new technologies and add market share, or at least that was the plan. It worked. EMC’s aggressive acquisition strategy helped them become a dominant player in the storage market — and I always admired Joe’s strategy. To illustrate just how aggressive EMC was, check out this list of acquisitions from 2006 to 2010:

That’s 35 acquisitions during the four years I worked there. EMC’s strategy becomes obvious: Buy all the intellectual property you can find — and become a market leader. For now, they still are one.

Dell’s ambitious plan – can they follow through?

Michael Dell has had his share of problems; but he’s built a lasting company in a very crowded space. It remains to be seen how the merger will affect Dell’s product line. In any case, it’s pretty clear that Dell’s goal is to become a one-stop shop for IT: a single vendor for servers, networks, hypervisor, and storage. The question is whether Dell can follow through on such an ambitious plan. It’s not enough to have technology from four categories, you need to make them work together (and duct tape solutions don’t count).

Speaking of Dell, I’ve worked there, too, for about six months. Let’s just say that back then they hadn’t quite nailed down the intricacies of graceful mergers. That said, you could really tell they were trying. In any case, mergers and acquisitions are risky. If I were a customer looking at Dell and EMC, I’d at least be a little concerned.

Mobility, hyper-consolidation and immediate data access

This merger is indicative of bigger changes in the IT industry. A desire for mobility, hyper-consolidation, and immediate data access have gripped vendors and customers alike. It’s because of these needs in the market that storage upstarts have given companies like EMC a run for its money. The market is shrinking at the top. Joe Tucci could see that the flame was dimming as far back as 2010 when he talked about stepping down. After years of dominance by a few big players, the 25 billion-dollar pie that is the enterprise storage industry is slowly getting eaten by new arrivals.

Over the last three to five years, upstarts have come out of the woodwork. When it comes to the annual VMware tradeshow: it really shouldn’t be called VMworld anymore – “StorageWorld” would be more appropriate. Wait, that’s right, Dell now owns VMware, too. Just to put things in perspective, take a look at the main players in the storage-related industry:

Main Players in the Storage-Related Industry

Change is good

You have to feel bad for customers who are looking at new storage. Between a gaggle of traditional storage vendors and a number of upstarts, the number of storage choices is a challenge. The new guys can make big claims; but it’s hard to turn your back on some of the most trusted names in storage. Familiarity is good, and change is bad. It’s human nature to feel this way, right?

But the truth is that change is good — and customers are starting to realize this reality. Dell’s plan to become a “go to” vendor seems rather optimistic in light of what upstarts can offer. These days, companies that want a “go to” solution usually end up in the Cloud. People buy their own storage for control, performance, and versatility. However, Dell seems focused on offering a single IT environment, where one component purchase forces another. Check out this article by Dave Raffo at TechTarget: Dell-EMC acquisition leaves questions as Tucci steps away. It’s a pretty interesting and realistic perspective on how things may shake out.

This is not to say that there isn’t some validity to buying your way into a market. As mentioned previously, EMC did that rather successfully. However, a lot has changed in the past few years, and while I was there, EMC also had some of the best sales reps and engineers in the business. EMC was full of dedicated folks who were open to mentoring me, a young enthusiastic geek who at that time knew nothing about storage. EMC was a fantastic place to start a career in storage. Indeed, EMC was once a force of change, both in the industry — and in my own life. However, that force of change is starting to wane. Today’s changes are coming from places no one expected — and they’re coming fast.

Changes comin’ fast

Pure Storage recently went public. Pure came into a market that was completely owned by a few big companies. Pure didn’t hesitate to buck the status quo — and the market rewarded that. It’s a sign that new storage companies are making an impact. Though Pure’s IPO wasn’t exactly a blockbuster, its stock price surged upon news of EMC’s acquisition.

Pure’s success shows that customers are looking for new ways to store their data, and more so, new companies with whom to do business. I think a big part of Pure’s success is its ability to communicate counter to traditional “enterprise” messaging. Furthermore, they’ve helped companies like Tegile revolutionize our industry with choice. Choice is huge. After nearly ten years in the storage industry, what I’ve noticed is that change happens whether you like it or not. The question is, how prepared are you to deal with change?

What have you done for me lately?

In light of large changes in the storage industry, companies are starting to ask their storage vendors, “What have you done for me lately?” As a sales engineer at Tegile, I often thought about how customers benefit from their purchase. Just how much benefit do they get from our products? The answer is one we all love to give: it depends.

Ask yourself what your company will get from its storage purchase:

How will the product will help me make money (flash performance that turns my company into a productive machine)

How will the product save me time and money (CAPEX, OPEX, and ROI) – and keep me out of the datacenter at 3 am (reduce risk)

The above concerns are often underlined by a final question: How will the product make me look to my managers? At Tegile, we know our products have advantages in all of the above areas — and more. Heck, I gambled my career on an upstart — but it’s an upstart that was specifically designed to solve the traditional issues that customers face. That’s why I took an (educated) leap of faith and went with Tegile.

Tegile’s on a roll

When it comes to new storage vendors, Tegile is the only upstart that’s on both Gartner Magic Quadrants (all-flash and hybrid) as Visionaries. That sounds like choice to me. In fact, choosing Tegile enables a user to deploy applications without thinking about back-end infrastructure limitations. Rather, Tegile products allow customers to choose one flash platform for performance and economics, regardless of the SLAs of each application in the datacenter.

Tegile also provides inline data reduction software techniques that reduce storage sprawl and provide true unified storage for complete hyper-consolidation. Whoops, there I go again talking about the feature-level micro advantages of Tegile when this post was intended to focus on the macro view of the storage industry in which I never imagined that Dell would buy EMC. In a way, EMC’s purchase feels like startup mode in reverse. The risk is there, just like a startup, but with the added risk of product line rationalizations on both sides. Not sure how I’d feel if I were a customer right now with a proposal on my desk for Dell EqualLogic.

The bell that signals change

Dell’s purchase of EMC may be the bell that signals companies to consider storage upstarts who already address the needs of a rapidly changing storage market. It’s unclear what the next 18 months will bring for Dell and EMC (not to mention VMware). Whatever occurs, the next year brings immense opportunity for upstarts in the storage industry.

Once I was told in a meeting with a prospect that I was an “ankle biter.” I loved that. Successful underdogs stay hidden under the radar until the time is right. Thanks to Dell’s bid for EMC, the bell to signal change is ringing loud and clear.